e-Invoice Exemptions in Malaysia and Relaxation Period [2025]

e-Invoicing in Malaysia began on August 1, 2024 for large businesses with an annual turnover exceeding RM 100 million and is being subsequently implemented for all businesses in Malaysia in phases. However, the Inland Revenue Board of Malaysia (IRBM) has specified exemptions to accommodate certain entities and transaction types.

Key Takeaways

• Rulers, royal consorts, government bodies, statutory authorities, and foreign diplomatic offices are exempt.
• Businesses with annual turnover below RM500,000 are exempt (unless linked to larger groups).
• Employment income, pensions, alimony, zakat, scholarships, and some dividends don’t need e-invoices.
• Refundable deposits, wrong payments, inter-department transfers, and expired/free vouchers are excluded.
• Treatment depends on whether income is business-related or employment income.
• Foreign income exempt; imports/exports require self-billed or seller e-invoices

e-Invoicing Exemptions in Malaysia

In Malaysia, e-Invoicing exemptions generally apply to many businesses based on turnover such as those with annual turnover below RM 500,000, specific types of entities (e.g., certain statutory bodies, foreign diplomatic offices), and particular types of income (such as employment income, pensions, zakat, and some investment income)

Summary of all e-Invoice Exemptions in Malaysia

Here's a quick summary of all transactions and entities exempt from issuing e-Invoices in Malaysia, based on the latest guidelines:

1. Entities and Persons Exempt from Issuing e-Invoice

The following entities and individuals are exempt from issuing e-Invoices, including self-billed e-Invoices:

• Ruler and Ruling Chief (as per Section 76 of the Income Tax Act 1967).
• Former Ruler and Ruling Chief (except former Governor or Yang di-Pertua Negara of a State).
• Royal Consorts (Raja Perempuan, Sultanah, Tengku Ampuan, etc.).
• Government agencies, State authorities, Local authorities.
• Statutory bodies and statutory authorities.
• Facilities operated by the above authorities (hospitals, clinics, multipurpose halls, etc.).
• Foreign diplomatic and consular offices.

2. Types of Income and Transactions Exempt from e-Invoicing

Suppliers must issue e-Invoices for all B2B and B2G transactions. For B2C transactions, e-invoices are issued only upon customer demand. Other documents such as invoices, debit notes, credit notes, and refunds are also covered. 

However, certain types of income and transactions do not require an e-Invoice, including: 

• Employment income (salary, allowances, and benefits).
• Alimony payments.
• Pensions and government allowances.
• Dividend distributions in specific circumstances.
• Scholarships and education-related payments.
• Zakat contributions.
• Contract value for the buying or selling of securities or derivatives traded on a stock exchange or derivatives exchange in Malaysia or elsewhere.
• Disposal of shares of a company incorporated in or outside Malaysia and not listed on the stock exchange, except where the disposer is a company, limited liability partnership, trust body, or co-operative society.
• E-Invoices are not required for donations unless the recipient is an approved institution/fund or manages an approved project, in which case e-Invoices must be issued
  

3. Exemptions from e-Invoicing for Specific Transactions

The latest e-Invoicing guidelines provide clear exemptions for specific types of transactions where e-Invoices are not required or have special conditions. Below is a detailed breakdown of the exemptions:

A. Director Fees

The requirement for e-Invoice issuance depends on the nature of the contractual agreement with the company:

• Contract of Service (Employment Income):  If a director is employed under a service contract, their income is classified as employment income. No e-Invoice for salaries, allowances, or any payments under this category is required.
• Contract for Service (Independent Work): If a director is engaged under a contract for service, meaning they provide services independently (like a consultant), the fees are not considered employment income. An e-Invoice must be issued for any payments received under this arrangement.

B. Deposits

The e-Invoice requirement depends on whether the deposit is refundable or non-refundable:

• Refundable Deposits: No e-invoice is required at the time of payment. If the deposit is later forfeited, an e-invoice must be issued at that point.
• Non-Refundable Deposits: e-Invoice issuance is required at the time of payment.

C. Rental Income

The e-invoice requirement depends on whether the landlord is conducting a business:

• Landlord Conducting a Business: Must issue an e-invoice to the tenant.
• Landlord NOT Conducting a Business: If the tenant is a business entity, the tenant must issue a self-billed e-invoice for the rental payment.

D. Inter-Department / Inter-Division Transactions

No e-invoice is required for transactions within the same company, as these do not involve independent taxable entities. Businesses may choose to issue e-invoices for internal records, but it is not mandatory.

E. Gift Cards, Vouchers, and Loyalty Points

The treatment of e-invoices depends on the nature of the voucher:

• Free or Refundable Vouchers: No e-invoice is required at the time of issuance. If the voucher is redeemed, an e-invoice must be issued at that point.
• Non-Refundable Vouchers: e-Invoice is required at the time of sale.
• Expired Vouchers: No e-Invoice required for expired vouchers unless they were refundable.

F. Refund of Payments

No e-invoice is required for the following payment returns:

• Wrong Payments: If a customer or supplier accidentally transfers funds and the money is refunded, an e-invoice is not needed.
• Overpayments: If a buyer overpays an invoice and the excess amount is refunded, no e-invoice is required.
• Return of Security Deposits: If a refundable deposit is returned to the payer, no e-Invoice is required.

G. Cross-Border Transactions

The e-invoicing requirements for international transactions depend on whether the entity is buying or selling:

• Foreign Income: No e-invoice is required for income received from overseas entities.
• Imports: Malaysian buyers must issue self-billed e-invoices when purchasing from foreign suppliers.
• Exports: Malaysian sellers must issue e-Invoices for sales to foreign buyers.

4. Special Exemptions During the Interim Relaxation Period

To facilitate a smooth transition to e-Invoicing, the IRBM has granted a 6-month interim relaxation period for each phase of businesses as they come under the e-Invoice mandate:

During this period:

• Businesses can generate consolidated e-invoice for all the transactions at the end of the month instead of separate e-invoices/
• No penalties for non-compliance will be imposed.
• Taxpayers can voluntarily implement e-Invoicing before the deadline.

Reasons for exemption from e-invoice in Malaysia

The exemptions from implementing e-Invoice in Malaysia are provided for several reasons:

• Sovereign Status: Entities such as rulers, ruling chiefs, and their consorts are exempted due to their sovereign status, which involves different legal and administrative frameworks.
• Government Regulations: Government bodies, state authorities, and local authorities are exempted as their financial transactions are governed by specific regulations and accounting practices separate from commercial entities.
• Different Legislative Mandates: Statutory bodies operate under their own legislative mandates and accounting procedures, which does not align with commercial e-invoicing requirements.
• International Agreements: Consular offices and personnel are often subject to diplomatic protocols and international agreements that dictate their financial processes, warranting exemption from commercial invoicing regulations.
• Operational Efficiency: Exempting certain entities and transactions streamlines the e-invoicing implementation process, focusing resources on the most necessary and relevant areas.
• Avoidance of Multiple Reporting: Certain types of income, such as employment income and distributions of dividends, are already subject to other forms of documentation and reporting.

Scholarship

Impact of e-invoice exemptions in Malaysia

There are both positive and negative impact of e-invoice exemptions in Malaysia. Here are some major impacts of exemptions.

1. Exempt entities benefit from reduced administrative burden and cost savings.
2. Enforcement of e-invoicing regulations becomes more challenging with exemptions in place.
3. Exemptions lead to a lack of uniformity in the documentation and SST returns.
4. Exemptions reduce the workload on regulatory officials tasked with overseeing e-invoicing compliance.

Conclusion

Malaysia’s e-invoicing exemptions reflect a balanced approach, ensuring that critical businesses comply while providing necessary relief to smaller businesses, government bodies, and non-commercial transactions. These exemptions ensure that e-Invoicing targets the right business activities without imposing unnecessary administrative burdens on non-commercial entities and exempt transactions. 

Furthermore, embracing efficient invoicing solutions like those offered by ClearTax can significantly smoothen this transition towards e-invoicing.

ClearTax with its extensive experience across various nations, provides simplified, faster, and more efficient e-invoicing solutions, making the e-invoicing process compliant and highly efficient. 

Also Read

e-Invoicing FAQs  in Malaysia

Transaction Types of e-Invoicing in Malaysia

e-Invoice Model in Malaysia

Important Terms in Malaysia e-Invoicing

Reasons for Rejection and Cancellation of e-Invoice in Malaysia

e-Invoice Malaysia Penalties

Self-Billed e-Invoice in Malaysia